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Koippally Brothers v. Incometax Officer, Thiruvalla
Structured Summary of the Opinion
Factual and Procedural Background
The petitioner is a firm assessable to income-tax. The firm was obliged to furnish its return for the assessment year 1968–1969 by 30-6-1968 but filed the return only on 28-6-1969. The delay in filing was not noticed at the time of the original assessment. Subsequently the Commissioner of Income-tax took up suo motu revision, held the assessment erroneous for failure to levy interest under S. 139, and remitted the matter to the Income-tax Officer to deal with the levy of interest. The Income-tax Officer, by order (Ext. P-3) dated 26-2-1973, levied interest of Rs. 6,515 under S. 139(1)(iii) on the ground that the return had been filed late without sufficient cause. The petitioner appealed to the Appellate Assistant Commissioner of Income-tax, who allowed the appeal; that order was reversed by the Income-tax Appellate Tribunal (Cochin Bench) which held that the Appellate Assistant Commissioner lacked jurisdiction to entertain the appeal against the levy of interest. The petitioner challenged Ext. P-3 before this Court in the present proceedings.
Legal Issues Presented
- Whether a person who did not furnish the return within the time allowed under S. 139(1) or S. 139(2), but who furnished the return subsequently before the end of the period specified in clause (b) of S. 139(4), is liable to pay interest under sub-clause (iii) of the proviso to sub-section (1) of S. 139 of the Income-tax Act.
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Kesavan Naniboodiri v. State (1976 KLT. 427) | Principle of construing statutes to promote the purpose and object of the Act; the rule of reading down provisions to avoid rendering parts meaningless or otiose. | The Court relied on this authority to support the approach of construing S. 139(4)(a) purposively so that each part of the statute is given effect and the objective of levying interest on belated voluntary returns is not defeated. |
| O.P. 4855 of 1972 (unreported decision of this Court) | Held that where a petitioner voluntarily filed returns within clause (b) of S. 139(4), the provisions of clause (iii) of the proviso to S. 139(1) apply and penal interest could be levied. | The Court referred to and relied upon this earlier decision of the same Court as supporting the validity of levying interest where returns were filed voluntarily within S. 139(4)(b). |
| Krishnalal Haricharan v. ITO (82 ITR. 660) | Held (by the Andhra Pradesh High Court Division Bench) that where the assessee did not make an application to extend the time to file the return, proviso (iii) to S. 139(1) could not be invoked to levy interest. | The Court noted this decision as representing one line of authority but observed that S. 139(4)(a) had not been noticed in that decision; the Court did not follow this view and regarded it as one of the conflicting authorities. |
| ITO v. Secunderabad Tin Industries (113 ITR. 1 (FB)) — Full Bench, Andhra Pradesh | Full Bench overruled the earlier Andhra decision (Krishnalal) and held that S. 139(4)(a) should be read so that clause (iii) of the proviso to S. 139(1) applies to voluntary belated returns filed within the period specified in S. 139(4)(b). | The Court expressed respectful agreement with this Full Bench decision and relied on it as supporting the conclusion that interest can be levied even when no application for extension was made but the return was filed within S. 139(4)(b). |
| Messrs Garg & Company v. Commissioner of Income-Tax (97 ITR. 639) — Delhi High Court | Took the view that where no application for extension is made, clause (iii) to S. 139(1) does not authorize levy of interest (i.e., favourable to the assessee). | The Court identified this as one of the authorities taking the contrary view; it did not follow this approach and instead aligned with authorities upholding levy of interest. |
| Commissioner of Income-Tax, Bihar v. Bahri Bros. (P.) Ltd. (102 ITR. 443) — Patna High Court | Adopted the view that, absent an application for extension, proviso (iii) to S. 139(1) cannot be applied to levy interest on belated returns filed under S. 139(4)(b). | The Court recorded this decision as part of the body of conflicting authorities but disagreed with that interpretation in the present case. |
| Mulakh Raj Bimal Kumar v. ITO (107 ITR. 382) — Jammu & Kashmir High Court | Took the same view as in Krishnalal and related decisions (no interest where no extension application was made). | The Court noted it among the decisions taking the contrary view and did not adopt it. |
| National Hotel & Dilkusha Cabin v. ITO (107 ITR. 559) — Calcutta High Court | Adopted the view that proviso (iii) is not applicable where the assessee has not applied for an extension (i.e., favourable to assessee). | Noted as one of the contrary decisions; the Court did not follow this approach and preferred the line of authorities permitting levy. |
| Ganesh Das Sreeram v. ITO (93 ITR. 19) — Gauhati High Court | Applied the plain language of S. 139(4) with S. 139(1)(ii) to permit levy of interest in cases of voluntary belated returns filed under S. 139(4)(b). | The Court approved and cited this decision as one of the authorities supporting the view that clause (iii) applies and interest is leviable. |
| Indian Telephone Industries Co-op. Socy. Ltd. v. ITO (86 (1972) ITR. 566 / referenced also as Mysore High Court decision) | Found that S. 139(4)(a) must be read as enabling the application of clause (iii) and therefore interest could be levied on belated voluntary returns. | The Court expressly agreed with the reasoning in this case and cited it as supporting the construction that clause (iii) applies to returns filed under S. 139(4)(a). |
| Biswanath Ghosh v. ITO (95 ITR. 372) — Orissa High Court | Held in favour of applying clause (iii) to returns filed under S. 139(4)(b), allowing levy of interest. | The Court cited and aligned with this decision as part of the supporting authorities for the levy of interest. |
| Chhotalal & Co. v. ITO (105 ITR. 230) — High Court of Gujarat | Adopted the view that S. 139(4)(a) invokes the application of clause (iii) and permits levy of interest on belated returns filed within the S. 139(4)(b) period. | The Court cited this decision and stated its respectful agreement with its reasoning, using it as support for upholding the levy of interest in the present case. |
Court's Reasoning and Analysis
The Court analysed the relevant statutory framework and focused on the interplay between S. 139(1) (the primary obligation to furnish returns and the proviso allowing the Income-tax Officer to extend the date on application) and S. 139(4)(a) (which allows a person who has not furnished a return within S. 139(1) or S. 139(2) to furnish a return before the end of the period specified in clause (b), and states that the provisions of clause (iii) of the proviso to sub-section (1) shall apply in every such case).
The Court observed that sub-clauses (i) and (ii) of the proviso to S. 139(1) concern discretionary extensions of time by the Income-tax Officer without charging interest, whereas sub-clause (iii) addresses extensions beyond those dates where interest is prescribed. The proviso, when read in context, plainly applies where there is an application to extend time. However, S. 139(4)(a) refers to applying clause (iii) to cases of persons who have not complied with S. 139(1) or S. 139(2) but who voluntarily furnish returns within the longer period under clause (b) of sub-section (4).
The Court reasoned that interpreting the reference in S. 139(4)(a) to clause (iii) as applying only where an application for extension had been made would render the provision in S. 139(4)(a) (as to the application of clause (iii) in the case of voluntary belated returns) meaningless and otiose. The Court considered such an interpretation unnecessary and contrary to statutory purpose. Instead, the Court concluded that S. 139(4)(a) should be read purposively so that clause (iii) applies in the manner described: interest at nine percent per annum is payable from the appropriate starting date of the assessment year to the date of furnishing the return, and the method of calculating the interest is as set out in clause (iii)(a) and (b).
The Court relied on the established rule of statutory construction that statutes should be read in a manner that promotes their purpose and avoids rendering provisions meaningless, citing Kesavan Naniboodiri v. State in support of that principle. The Court examined conflicting High Court authorities, identified a line of decisions that had taken the contrary view (that no interest could be levied absent an application for extension), and expressly aligned itself with a line of authorities (including a Full Bench decision of the Andhra Pradesh High Court and several other High Courts) holding that clause (iii) applies to voluntary belated returns filed under S. 139(4)(b).
On that basis, the Court found no reason to interfere with the Income-tax Officer's order levying interest under S. 139(1)(iii) and dismissed the original petition.
Holding and Implications
Core Holding: The Original Petition is dismissed and the levy of interest under S. 139(1)(iii) as imposed by the Income-tax Officer (Ext. P-3) is upheld.
Direct implications:
- The levy of interest of Rs. 6,515 under S. 139(1)(iii) in respect of the belated return filed by the petitioner was held to be valid and not assailable.
- The petition challenging Ext. P-3 fails and is dismissed. The Court ordered no costs.
Broader interpretive implication explicitly stated in the opinion:
- The Court sided with the line of authority (including a Full Bench of the Andhra Pradesh High Court and several other High Courts) that S. 139(4)(a) must be read so that clause (iii) of the proviso to S. 139(1) applies to voluntary belated returns filed within the period specified in S. 139(4)(b), even where no separate application for extension has been made to the Income-tax Officer.
1. In the case of a person who has not furnished return within time allowed to him under sub-Ss. (1) or (2) of S. 139 of the Income Tax Act, if he furnished the return subsequently before the end of the period specified in clause (b) of S. 139(4) of the Income-tax Act is he liable to pay the interest contemplated by sub-clause (iii) of the proviso to sub-section (I) of S. 139 of the Act? This is the question that arises for decision in this case. On this question different views have been expressed by the High Courts in India.
2. The petitioner in this case is a firm. It is an assessee to income-tax. The petitioner filed his return of Income for the assessment year 1968-1969 only on 28-6-1969 though it was due on 30-6-1968.
3. That there was delay in filing the return was not noticed at the time of assessment for the assessment year 1968-1969. Later it was noticed by the Commissioner of Income-tax who took up suo motu revision. He held that the assessment was erroneous in so far as the assessing authority had failed to levy interest under S. 139 of the Act, and therefore the matter was remitted to the Income-tax officer to enable him to deal with the case in regard to the levy of interest. Pursuant to this the Income-tax Officer passed Ext. P-3 order on 26-2-1973. In this he held that the return that ought to have been filed on 30-6-1968 was filed only on 28-6-1969 and there was no sufficient reason for the late filing of the return. Hence he levied interest of Rs. 6515 under S. 139(1)(iii) of the Act. The petitioner took up the matter in appeal before the Appellate Assistant Commissioner of Income tax. The latter allowed the appeal. This was reversed by the Income-tax Appellate Tribunal, Cochin Bench before whom the Department took up the matter in further appeal. The reversal of the appeal was on the ground that the Appellate Assistant Commissioner had no jurisdiction to entertain the appeal against the levy of interest. The petitioner has challenged Ext. P-3 order before this Court in these proceedings.
4. That the petitioner was bound to file return under S. 139(1) in this case is not disputed. But he did not file the return. He also did not file return under S. 139(2) of the Act. He filed return within the period of 3 years contemplated under S. 139(4)(b)(ii) of the Act and that was without applying for any extension of time. In other words, the return was filed within the period specified in clause (b) of sub-section (4) of S. 139 and the assessee had not made any application to the officer earlier to extend the date of furnishing the return. Whether in such a case interest contemplated by clause (iii) to the proviso to sub-section (1) of S. 139 of the Act could be levied is the question which I have to deal with here. It is useful here to refer to sub-section (4)(a) of S. 139 of the Act. That reads:—
“(4)(a) Any person who has not furnished a return within the time allowed to him under sub-section (1) or sub-section (2) may before the assessment is made, furnish the return for any previous year at any time before the end of the period specified in clause (b), and the provisions of clause (iii) of the proviso to sub-section (1) shall apply in every such case.”
5. It may also be necessary to refer to S. 139(1). That obliges every person, if his total income or the total income of any other person in respect of which he is assessable under the Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, to furnish a return of his income or the income of such other person during the previous year in the prescribed form and verfied in the perscribed manner and setting forth such other particulars as may be prescribed within the time specified in that sub-section. The proviso to that sub-section is relevant and I am quoting it here:
“Provided that, on an application made in the prescribed manner, the Income tax Officer may, in his discretion, extend the date for furnishing the return—
((1) in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired on or before the 31st day of December of the year immediately preceding the assessment year, and in the case of any person referred to in clause (b), up to a period not extending beyond the 30th day of September of the assessment year without charging any interest;
(ii) in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired after the 31st day of December of the year, immediately preceding 31st day of December of the assessment year without charging any interest; and
(iii) upto any period falling beyond the dates mentioned in clauses (i) and (ii), in which case, interest at nine percent per annum shall be payable from the 1st day of October or the 1st day of January, as the case may be, of the assessment year to the date of the furnishing of the return—
(a) in the case of a registered firm or an unregistered firm which has been assessed under clause (b) of S. 183, on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm, and
(b) in any other case, on the amount of tax payable on the total income, reduced by the advance tax, if any, paid or by any tax deducted at source, as the case may be.”
6. It is therefore evident that obligation to file return within the time specified under S. 139(1) is subject to an extension of the date which extension is to be made by the Income-tax Officer on an application made to him. Sub-clauses (i) and (ii) deal with cases where the Income tax Officer is free to waive the interest whereas sub-clause (iii) deals with cases where he is obliged to charge interest. That is in cases where the period of extension falls beyond the dates mentioned in sub-clauses (i) and (ii). The proviso read in the context of sub-section (1) of S. 139 applies plainly to cases where there is an application for extension of time to file return and that is granted by the Incometax Officer. Since S. 139(4)(a) refers to application of the provisions of sub-clause (iii) of the proviso to sub-section (1) to the case of any person who does not fall within sub-sections (1) and (2) of S. 139 and who furnishes return within the period specified in sub-clause (b) of S. 139(4), it can refer only to a case where there is non-compliance by a person with sub-sections (1) and (2). That would be the case where there is neither filing of return within the period mentioned in sub-section (1) of S. 139 or within the time mentioned in the notice served under S. 139(2), but within the longer time contemplated under 139(4)(a) a return is voluntarily submitted by a person. In such a case there is no question of his seeking extension of time for filing the return. To say that because of the reference to sub-clause (iii) of S. 139(1) proviso the levy of interest under S. 139(4)(a) can be only in cases where there is application for extension of time to file return would be to render the provision in sub-section (4)(a) in so far as it concerns the application of sub-clause (iii) of sub-section (1) of S. 139, inoperative, and otiose. No legislative piece is to be read and understood in that manner if it is capable of a construction giving effect to every part. In the context and scheme of the provision in S. 139 it cannot be that while interest is levied in respect of delayed returns under sub-sections (1) and (2) where there is an extension on an application by the assessee, no interest is levied where the return is filed after a longer period and the assessee does not even apply for an extension. Logically in such a case also interest must be due. Evidently the purpose and object of the clauses in sub-section (4)(a) adverted to is to see that such interest is leviable in such a case. That is not disputed. In fact even the decisions which take the view in favour of the assessee on the interpretation of this section have not held that this is not the object of the section. But the question is only whether this object is defeated by the language in the section. To read the words “the provisions of clause (iii) of the proviso to sub-section (1) shall apply” in sub-section 4(a) of S. 139 as enabling such application of that sub-clause only if there is an application made in the prescribed manner to the Income-tax Officer to extend the time for furnishing the return would as I have already indicated in effect be to hold that no interest would be leviable in the case of voluntary belated return belated in the sense though it is filed within the time contemplated by sub-section (4)(a) of S. 139 of the Act that is filed beyond the period specified in sub-sections I and 2 of S. 139. There is no compelling need to read the section in that manner. Without difficulty the clause could be plainly understood as enabling the levy of interest in the manner contemplated in clause (iii) to the proviso to sub-section (I) of S. 139. In other words sub-section (4)(a) could be read and understood thus: “Any person who has not furnished the return within the time allowed to him under sub-section (1) or sub-section (2) may before the assessment is made, furnish a return for any previous year at any time before the end of the period specified in clause (b), and in such a case interest at nine percent per annum shall be payable from the first day of October or the 1st day of January as the case may be of the assessment year to the date of furnishing of the return (a) in the case of a registered firm or an unregistered firm which has been assessed under clause (b) of S. 183, on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm and (b) in any other case, on the amount of tax payable on the total income reduced by the advance tax, if any, paid or by any tax deducted at source, as the case may be”. Instead of writing this into in sub-section (4)(a), for the sake of convenience the Parliament has made reference to sub-clause (iii) to the proviso to S. 139(1) to indicate the application of the abovesaid clause.
7. The practice of construing statutes in a manner promoting the purpose and object of the Act and not too literally so as to defeat the purpose or render the provision meaningless and otiose is a well accepted rule of construction of statutes. In fact I need not go into this question elaborately, for, this rule is so well established to need any discussion. I may only refer to the decision of the Full Bench of this Court in Kesavan Naniboodiri v. State (1976 KLT. 427) where the principle of reading down the provisions of statute has been elaborately discussed by this Court.
8. As indicated earlier conflicting views have been taken by various High Courts in India on this question. Before referring to them I may refer to an earlier unreported decision of this Court on this question. That is in O.P 4855 of 1972. In that decision I had occasion to consider this matter. In paragraphs 5 and 6 of the judgment it was observed thus in that case:
“It is true that the petitioner had not made an application in the prescribed manner to extend the date for furnishing the return. But it is seen that he had voluntarily filed returns within the period provided under clause (b) of sub-section (4) of S. 139 of the Act. Therefore the provisions of S. 139(4)(a) operate to apply the provisions of clause (iii) of the proviso to sub-section (1) of S. 139 to such a case and therefore the order in so far as it levied penal interest under that section is valid.
6. Counsel relies on the decision of the High Court of Andhra Pradesh in Krishnalal Haricharan v. ITO. (82 (1971) ITR. 660). There, of course, it was held that in cases where, the assessee did not make an application to extend the time to file return there would be no question of levy of interest under proviso (iii) to sub-section (1) of S. 139 of the Income-tax Act. But evidently sub-section (4)(a) of S. 139 was not noticed by the Court as rightly held by the High Court of Mysore in Indian Telephone Industries Co-operative Society, Ltd. v. ITO. (89 (1972) ITR. 566).”
9. The decision in Krishnalal Haricharan v. I.TO. (82 (1971) ITR. 660) has recently been considered by a Full Bench of the Andhra Pradesh High Court in ITO. v. Secunderabad Tin Industries (113 ITR. 1 (FB)) and the Full Bench has overruled its earlier decision holding that the provision in S. 139(4)(a) has not been noticed by the Division Bench in the earlier decision. No doubt I find that the Delhi High Court in Messrs Garg & Company…Petitioner v. Commissioner Of Income-Tax…. 97 (1974) ITR. 639), the Patna High Court in Commissioner Of Income-Tax, Bihar v. Bahri Bros. (P.) Ltd. (102 (1976) ITR. 443), the High Court of Jammu and Kashmir in Mulakh Raj Bimal Kumar v. ITO. (107 (1977) ITR. 382) and the Calcutta High Court in National Hotel & Dilkusha Cabin v. ITO. (107 (1977) ITR. 559) seem to have taken the same view as the view of the earlier Division Bench of the Andhra Pradesh High Court. But I find that it is the plain language of S. 139(4) read with S. 139(1)(ii) that has been applied by the learned Judges in these cases. That the consequence of reading it in that manner would be to render a part of the section ineffective or inoperative has evidently been not sufficiently appreciated by the learned Judges. I am in respectful agreement with the views expressed by the Full Bench of the Andhra Pradesh High. Court in ITO. v. Secunderabad Tin Industries (113 ITR. 1 (FB.)), that of the Gauhati High Court in Ganesh Das Sreeram v. ITO. (93 (1974) ITR. 19), that of the Karnataka High Court in Indian Telephone Industries Co-op. Socy. Ltd. v. ITO. (86 (1972) ITR. 566), that of the Orissa High Court in Biswanath Ghosh v. ITO. (95 (1974) ITR. 372) and that of the High Court of Gujarat in Chhotalal & Co. v. ITO. (105 (1976) ITR. 230).
10. In this view I think that there is no reason to interfere with the order of the Income-tax Officer. The levy of interest is not assailable. The Original Petition fails. It is dismissed. No costs.
11. Dismissed.
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